Regional areas rise in popularity as Melbourne prices go up and excess stock is absorbed by overseas buyers
Despite the influx of new stock, Melbourne’s economic strength keeps it going steady in the property market.
“It has a tendency to overbuild, but at the same time it’s a city that’s much more affordable than Sydney, so in a lot of ways the amount of development taking place is good for economic growth,” says Nerida Conisbee, REA Group’s chief economist.
“A lot of that stock seems to have been absorbed – there’s a lot of interest from interstate and overseas buyers. There might not be enough tenants for all that development, though at the moment the vacancy rate is quite low.”
Prices have increased as a result of this demand. CoreLogic’s Home Value Index results indicate that Melbourne’s dwelling prices jumped by 3.1% in July 2017. Population growth has been steady due to high job creation. The implementation of first home buyer incentives is also contributing to the rising interest.
Nonetheless, growth conditions have slowed, as the quarterly peak growth rate for 2017 dropped from 5.5% to 4.2% in the same month.
Regional cities capture interest
Areas outside of Melbourne are coming to the fore as alternatives. “Regional cities such as Bendigo are attracting more attention,” says Simon Pressley, managing director of Propertyology.
“Over the last seven years ending 2016, Bendigo’s property price growth was more than double the rate of Brisbane’s. The economic profile of Bendigo oozes diversity and resembles that of a capital city, [and] there are a few good infrastructure projects which we have catalogued as positives.”
Geelong is another city that has significant potential. According to ABS data, the population in this city, the second-largest in Victoria, is expected to increase by over 30% in the next two decades as it receives the overflow from Melbourne’s boom. The state has thus been taking initiatives to diversify Geelong’s economy and add to its infrastructure.
“The affordability of the area, with many suburbs around Geelong having median house prices of around $400,000, is also an excellent pull factor for the region,” adds Lindy Lear, general manager of Rocket Property Group.
“For investors, the vacancy rates for the greater Geelong area have been steady at under 2%. The secret for investors is to find the value opportunities where the demand is highest from first home buyers who want to be near new infrastructure like new schools, recreation facilities and new shopping projects that are about to be completed. That is where your target tenant wants to be as well.”
SUBURB TO WATCH
LANGWARRIN: Melbourne suburb on urban fringe
A semi-rural suburb of Melbourne, situated around 40km from the CBD, Langwarrin is home to around 21,000 people.
It’s the type of location that investors chasing a low-maintenance and affordable investment should consider investigating further, says James Nihill, managing director of Patrick Leo.
“When considering a regional area, there are few better than regional Victoria,” he says. “A major drawcard for investors is that these regional areas are extremely affordable. Furthermore, regional towns are often bolstered by major government infrastructure projects which strengthen their local economy and drive employment and population growth.”
Affordability: The median house price is far more affordable here than in the CBD
Family friendly: The suburb has plenty of shops, parks, schools and sports facilities
